BUY recommendations & hedge funds closing short positions9 Jul 2020 23:58
“buy” recommendations, starting with HSBC:
“While the suppliers implicated in the Sunday Times report have been terminated by Boohoo for breaching its code of conduct on record-keeping and sub-contracting production, there is thus far no evidence to support claims that workers were paid GBP3.50 per hour by these suppliers versus the UK National Living Wage of GBP8.20-8.72 for workers aged 21 or over. We note the following:
? The UK short-lead-time supply chain is a sustainable competitive advantage, further supported by the group’s diversification into international markets, which now account for 60% of CoGS (versus c30% in last three years), including 40% in Asia and 20% in Europe. We expect reliance on UK supply as a percentage of CoGS to continue to diminish over the medium to long term.
? We believe any impact on demand will be limited. Boohoo targets younger and less affluent customers who are influenced by social media. It has proactively reached out to many ‘influencers’ to reassure them in light of the situation. We believe that negative influencer commentary has been limited to date and that Boohoo’s customers are generally driven more by price, choice, and newness.
500p target price and Buy rating (unchanged)”
Goldman Sachs doesn’t even sully its “buy” analysis with concepts of right and wrong: Ahead of the independent enquiry results, we have retained our Boohoo FY21 earnings forecast (EPS 7.67p, +30% yoy). price target 345p
http://ftalphaville.ft.com/2020/07/09/1594288944000/Markets-Now---Thursday-9th-July-2020/
Analysts said Boohoo’s shares had largely been pushed up by small-scale investors taking advantage of the steep slide in the fashion chain’s share price to make an investment.
The price of shares was also bolstered as hedge funds, including PSquared Asset Management, which had taken short positions – a bet against a company’s share price – closed their positions after benefiting from three days of sharp falls in Boohoo’s shares.
John Stevenson, an analyst at Peel Hunt, said there was a recognition that the share price had dropped too far, given that Boohoo had made a serious pledge to tackle the problems in Leicester.
The group’s top institutional investor, Jupiter Asset Management’s Merian Global Investors arm, had increased its interest in Boohoo to just over 10%, also reassured the City.
https://amp.theguardian.com/fashion/2020/jul/09/boohoo-shares-bounce-back-after-pledge-to-improve-factory-conditions
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